Oil prices at their lowest for 2017, Permian Basin has a lot of supply

MIDLAND, TX (KWES) - The price of oil has fallen to its lowest in 2017 and experts said it's because there's too much supply.

"The break-even point of our local production continues to fall as technology improves," said financial expert Mickey Cargile with Cargile Investments. "It's something that has a big impact locally, especially to our oil producers but it is not something that's fatal."

U.S. crude oil prices have fallen below $50 a barrel for the first time since December 2016. At the time, OPEC approved the move to cut back on production to prevent the oversupply of oil and increase prices. But there's more supply than demand. That number of oil production has increased in the Permian Basin, where it's estimated at 2.1 million barrels a day.

"We not only have to meet our demand, but we have to work off that excess inventory for our prices to stay high," said Cargile. "The demand has not yet caught up to the supply that we have. Because we have more supply than what was originally thought, that brought the price down about 11% last week."

But even though the Permian Basin is producing so much oil, experts said in the long term, it's expected the demand will be caught up to the supply before 2020.

"The biggest factor in our local economy are the number of drilling rigs working," said Cargile. "That number has increased for the last 15 consecutive weeks. We're up to 309 drilling rigs now. We were at 152 a year ago. These companies are going to continue to develop their properties regardless of the oil prices fluctuating by the small amounts."

OPEC's agreement to cut production numbers expires in June but an extension is possible if producers show they're complying with their agreements.